Ag Policy Blog

USDA has finalized rules on active engagement for farm managers in a rule coming out Wednesday in the Federal Register.

The rules apply to general partnership and joint ventures, not family farm operations.

According to USDA, about 3,200 general partnerships or joint ventures will have people lose eligibility for farm-program payments over the next three years. Those operations will lose out on roughly $106 million in payments over that time.

A key component of the rule is limiting the number of farm managers who can receive farm-program payments. A farm must be considered "large" or "complex" to have two managers qualify for payments. For three farm managers, the farm must meet both size and complexity rules.

No farm entities made up solely of family members is affected by this rule. Repeat: no family farms made up solely of family members is affected by this rule.

The default for a "large farming operation" is a farm with more than 2,500 acres with some range in there. Regarding "complexity," a farm operation that seeks payments for multiple people based on complexity must make a request to the state Farm Service Agency committee. The diversification of the operation then becomes a factor in the FSA committee signing off on that request.

Farm managers in these joint operations must prove they contribute at least 500 hours of farm-management work per year or at least 25% of the time necessary to run the farm. And they must keep some sort of record book to show they are indeed doing the management or labor required. This new definition defines "active personal management" on the operation and only applies to farm managers on non-family farming operations seeking to qualify multiple people for program payments.

If a person is found ineligible, the overall operation could lose payment eligibility for up to $125,000. Each person in the operation must contribute management or labor to qualify, or risk losing that member's share of the payment.

The rule does not change the $125,000 per-person payment limit under the farm bill.

While the rule defines what it takes to be eligible, not everyone is happy with USDA's work on the rule. Sen. Charles Grassley, R-Iowa, one of the senators who pushed for tighter payment limits in the farm bill debate, stated that the rules effectively ended up "watered down" largely because Congress tied USDA's hands to block tighter limits.

“The final rule issued by the Department of Agriculture to reduce abuses of the actively engaged loophole is a first step," Grassley said. "While this rule still isn’t as stringent as the reforms approved by both bodies of Congress through my payment limit amendment, it represents a good faith effort by the department to make the farm bill more defensible, despite the indefensible loopholes left open by the conference committee.

The National Sustainable Agriculture Coalition noted the rule only affects less than 4% of farm operations. “By leaving the loophole door wide open for the other 96 percent, USDA has issued an invitation to farm reorganizations undertaken to maximize subsidies beyond the payment limit. Even for those farms who choose to keep their business structures organized as part of the four percent, the new rule provides for a limit over $1 million a year for the largest farms. This is the antithesis of reform," said Ferd Hoefner, policy director for NSAC.

The Federal Register posting for the rule can be found at https://s3.amazonaws.com/…

Follow me on Twitter @ChrisClaytonDTN.

© Copyright 2015 DTN/The Progressive Farmer. All rights reserved.